Author Topic: Military family seeking advice with investments  (Read 1477 times)

elpaso34

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Military family seeking advice with investments
« on: June 29, 2017, 08:00:31 AM »
Life Situation: Navy pilot with preschool teacher spouse (both 38 yrs old) and two kids living in Jacksonville, FL approximately four years away from retirement.

Adjusted Gross Income: $8400 monthly

Current expenses: Car ins $150, mortgage payment monthly of $1300: (P&I $903.65, Ins and Taxes $347.78, extra principal $48.57), boost mobile cell phone for both $63.54, electric $200 (conservative number I budget for $200 but bill is only that high in the summer for two months), comcast internet $90, church tithe $1025, bills savings to pay for yearly pest control, termite bond, amazon prime, vet, hoa, etc $260, allowance $400 ($200 each spouse), Utah 529 $200, Netflix $10.88, YMCA $85.60, water bill $95, school lunches for kids $52, air1 Christian radio $40, $2400 to pay for everything else (groceries, gas, toiletries, clothes, etc). = $6372

10% invested in TSP - $760.56 automatically taken out

Assets:
13 Subaru Legacy premium sedan : 41,940 miles    $13,147.00
15 Subaru Forester: 25,001 miles    $17,393.00
House:     $     206,000.00
Discover online savings acct:     $         6,411.60
Vanguard (spouse Roth IRA):     $       74,419.56
Vanguard (hubby Roth IRA):     $       30,313.45
TSP:    $       54,846.77
USAA Emergency fund    $             115.01
Utah 529 college savings acct    $       20,538.71


Liabilities: Only debt is 15 yr mortgage thru Wells Fargo: $123,770.87 at 2.875%

Specific Question(s): Since hubby is four years away from retirement, he is pretty adamant about not wanting a mortgage payment once he retires. Our monthly expenses leaves roughly $2000 open right now to invest. Aside from the 10% going to TSP, hed like to pay down the principal balance even more so that the house is paid off by retirement time and we wont have a mortgage payment. We are likely to sell the house and use proceeds to go towards new home in our forever home town if we move to TX (where I am originally from) or else just stay in current home to live in Jax as there are great schools in our area. Our goal is to be financially independent and work only when we want. By then hed be getting a $40k yearly pension from the military, and wed both look into substitute teaching to work when we want (pays $90 a day). If we continue to have a mortgage payment even after he retires, one of us would have to work full time; otherwise we would not make it based on a future budget weve sort of worked on together.

His idea is hed like to use some of the extra $2k to further pay down the house and open a separate Vanguard acct like a bond fund and transfer what we have in our discover online savings acct (paying 1%) to build up a car fund for the next 5-7 yrs. Hes not happy that the money is just sitting there only getting 1%. Im not in total agreement with this as Id like to continue investing into one or both of our Roths, plus I dont know what kind of tax hit wed experience with pulling out the money to buy a used car (or water heater or a/c, etc) down the line. His thinking was why keep pouring money into the TSP or Roth when we will not be able to use it until 59 and half and instead invest in something we could use 5-10 yrs from now? Were extremely blessed to be getting his pension in four years, but my question is to ask for any advice regarding of how to invest the $2000. Maybe Im missing something obvious but well be sitting down to talk about our finances in a few days once we get back home from a vacation were leaving for soon. I just want to be able to offer some insight in case the vanguard route is not the wisest. Thank you in advance for any advice or info!

Vindicated

  • Handlebar Stache
  • *****
  • Posts: 1070
  • Age: 33
  • Location: Indianapolis
Re: Military family seeking advice with investments
« Reply #1 on: June 29, 2017, 12:16:45 PM »
Welcome, elpaso34!

First, I am having trouble understanding where the $2400 for "everything else" is going.  For example, what we typically spend in a month: Groceries ($300), Gas ($100), Household ($100), Clothes ($50).  That's $550.  What are you doing with the other $1850??

If you can lower those "everything else" expenses, you could raise your investments or house payoff by to $3500 pretty easily.  This would also lower your monthly overall expenses to $6372 - $1850 = $4522.  Multiply by 12 for $54,264 yearly expenses.  Still quite high, but much better.  The point is, now you're only $54,264 - $40,000 = $14,264 short of his pension covering your living expenses.

That being said, you don't really need much money between now and 59.5, since you'll likely make $14k doing whatever fun side jobs you want, like student teaching.

On top of this, if you do pay off the house early, that's $1,300 less you'll be paying in the future, $4522 - $1300 = $3222 x 12 = $38,664 per year.  So, his pension will cover over 100% of your expenses if you make a few small changes and pay off the house. 

As for whether you should pay off the house or invest, it depends on you.  Investing in a vanguard fund like VTSAX historically gives much better return than paying off a mortgage early.  Will it for you?  No one knows the future.  If it would ease your life drastically to just have the mortgage paid, then do that.  I'd probably split it.  Pay a little extra on the mortgage, and invest most of the extra.

Either way, you really need to take a hard look at where your money is going.

Also, congrats on the fact that you're in such good shape either way!

Additional note:  I'm not familiar with air1, but I'm sure there are loads of free Christian podcasts that could save you $40/mo.  If you just want to support the station, that's fine.  But you're already tithing more than most. 
My MMM Journal: https://forum.mrmoneymustache.com/journals/my-almost-perfect-life-experience/

"Remember that sometimes not getting what you want is a wonderful stroke of luck. - Dalai Lama

elpaso34

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Military family seeking advice with investments
« Reply #2 on: June 29, 2017, 12:51:17 PM »
Vindicated,
Thank you so much for the reply and words of advice. The other $2400 is, as you mentioned, quite high for "other" expenses. I do the budget and just looking at June and May's expenses, our family spends way too much going out to eat- period. That alone cut in half would save us a lot of money. I hate to be anti-mustachian in this regard when other families do so much better. This is definitely something I'll be discussing with the hubby to make changes because the numbers do not lie. In looking our spreadsheet over, I'm almost ashamed at what we spend. :(

I've read all of MMM posts and am now beginning to see the importance of "less" as a whole. It will be easier to get the hubby on board with this because he's a saver by nature, but will be tougher for me.

Thanks again for your insight. I greatly appreciate it!! Also, air1 is a Christian radio station we are donating to each month to keep it going.

Vindicated

  • Handlebar Stache
  • *****
  • Posts: 1070
  • Age: 33
  • Location: Indianapolis
Re: Military family seeking advice with investments
« Reply #3 on: June 29, 2017, 01:41:59 PM »
An idea that may help you for meal planning.  We bought a small whiteboard that is magnetized to the fridge.  It's separated with 7 vertical lines for the days of the week.  Each weekend we plan meals for the upcoming week, and have increased our cooking at home % from ~20% to 90%!  Almost instantly we went from spending $400-$500 a month on eating out to $100-$200.

Also, we've been making more large meals (Lasagna, Casseroles, etc.) that feed us for 2+ days.  That helps a ton, since we are just getting into cooking for ourselves.

Don't be ashamed!  Get excited!  You have so much potential to redesign your spending, and change your financial outlook.
My MMM Journal: https://forum.mrmoneymustache.com/journals/my-almost-perfect-life-experience/

"Remember that sometimes not getting what you want is a wonderful stroke of luck. - Dalai Lama

elpaso34

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Military family seeking advice with investments
« Reply #4 on: June 29, 2017, 03:00:02 PM »
Vindicated,
Awesome idea for meal planning. I'll be getting the kids input, too so they feel like they contribute. Again, you're too kind in replying with some great info. Best of luck to you and yours as well.

Guide2003

  • Stubble
  • **
  • Posts: 128
  • Location: Mobile, AL
Re: Military family seeking advice with investments
« Reply #5 on: July 03, 2017, 01:47:18 PM »
Congrats on being so close to retirement and getting your ducks lined up early! As far as the first question about paying off the house early, I'm no pro but I'd think that it would make a pretty big difference if you were staying in the house or moving. If you knew you were moving at retirement, I'd think you'd want to save the extra house money in some kind of investment that would make more than you pay on the loan rather than putting it into the house. If you were for sure staying there for the beginning of your retirement then I could see paying it off early. Also, any extra paying down of the loan that's done doesn't win you brownie points with the bank. I'd be inclined to save the extra in a taxable account and use it to augment your payments once retired. That way you stay a little more liquid and flexible since you haven't totally ironed out the details of what retirement will look like. Even though the pension will be nice, more immediately accessible savings would be great to hedge unforeseen expenses such as moving.

As far as the car fund savings, hopefully you won't NEED another vehicle in 5-7 years (especially with subarus) unless you were trying to stagger the life expectancy of your garage. Remember that since you've already been taxed on your Roth IRA's you can withdraw any contributions at any time penalty-free. I think If I was in your position I'd throw that extra money into my IRA's and try to see how long I could hold out with the vehicles I had. Not to advocate taking money out of retirement accounts but rather to help convince yourself that there are better ways to keep that money working for you. Hopefully without a commute you'll be using the vehicles less as well.
We think sometimes that poverty is only being hungry, naked and homeless. The poverty of being unwanted, unloved and uncared for is the greatest poverty. We must start in our own homes to remedy this kind of poverty. Mother Teresa

elpaso34

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Military family seeking advice with investments
« Reply #6 on: July 05, 2017, 01:33:46 PM »
Guide2003,
Thanks so much for the kind words. My hubby and I have definitely also considered the Roth IRA route with withdrawals. Hoping the Subi's last us a very long time. I rarely drive mine since I commute to work (only 1.36 miles one way) and when I suggested to my coworkers that perhaps they start biking to/from work with me, they look at me like I'm crazy. All of us live within a five Mile radius to the preschool. I get the "I don't want to be stinky at work" excuse. Anyhow, thank you for your reply. Hope you had a great 4th.

DarkandStormy

  • Stubble
  • **
  • Posts: 139
  • Age: 28
  • Location: Columbus
Re: Military family seeking advice with investments
« Reply #7 on: July 06, 2017, 09:17:37 AM »
How many years are left on the mortgage?  At that rate, you're *probably* better off continuing to invest anything left over (based on historical rates of return from the market).  That said, if it's something like 5-7 years left to pay it off, there is a chance we'll see a downside coming soon, in stocks at least.

May I ask why he's so adamant about the mortgage being paid off?  It's not even your biggest monthly expense - $2,400 to "other" which you've noted could be cut down.

As someone mentioned above, you can take out the "principal" that you've invested into the Roths before 59.5 with no penalties (there are a few other conditions that need to be met - invested for 5 years is one, I believe).

Minor but I'd cut one of Netflix or Amazon Prime.  If you want Prime for the expedited shipping, cut out Netflix.  If you aren't using the benefits of Prime (beyond original programming) then I'd cut Prime.  It's small, but an extra $120 (if you cut Netflix) to invest.

I'd also look at new internet service if you can.  You mentioned moving down the line, but $90 is pretty high.  We get ours for $30/month (it's a promo deal, normally I think it's $35/month, maybe $40).  There are two of us and we are often streaming Netflix while checking e-mail, apps, etc.  No issues so far.  Depends on your internet usage, but I've found two people don't need more than 10 Mbps unless someone is video-conferencing or something like that.

Depending on the length of the mortgage, I don't think you'll need to work full-time...pension & substitute teaching should cover things.  Because for every additional $ to the principal is $ less you can put towards your nest egg, which should return more than your interest rate on the loan.

I think you should continue investing into Roths while you can (need earned income to contribute).  It's tax free for you when you start withdrawing - a big perk.  If you are looking to get out of the 1% Discover account or where to invest additional savings that isn't so risky, you could open a Vanguard taxable brokerage account.  Some mutual funds there that are less risky would be something like VWINX (2/3 bonds, 1/3 high-dividend stocks).  It's typically less volatile than an all-stock fund, but better returns than bonds over 5+ years.  Something like VASGX - about 2/3 stocks, 1/3 bonds.  I'd look at their "balanced fund" options and see if something like that fits your needs - funds that have historically increased moderately, but were well-protected in 2007/2008.  You won't get the huge 10+% annual returns, but you also won't see 1/3 of their worth drop in a year (most likely).  Just an idea for a more conservative idea with some of your extra savings - you mentioned about possibly using some of it in the next 5-10 years on home appliances, cars, etc.

davisgang90

  • Handlebar Stache
  • *****
  • Posts: 1000
  • Location: NoVa
    • Chart prepping
Re: Military family seeking advice with investments
« Reply #8 on: July 06, 2017, 05:52:23 PM »
Another Naval Aviator here.  I spent most of my time over at Mayport flying helos.  Currently in DC, retiring next summer.

A couple suggestions:
Commissary is still a great deal, exchange, not so much.  I used to stop at the commissary on the way home from work, so your husband has no excuse since he is on base every day.  ; ) 
If you don't have a crockpot and/or instant pot, get one.  Work great making meals while you are at work.
You have a super low rate on your mortgage, I'd not pay it off early.
TSP is a great deal, I'd max that before your husband's IRA. 
Check out my blog.  Early retirement from a military perspective.

http://chartprepping.com

elpaso34

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Military family seeking advice with investments
« Reply #9 on: July 07, 2017, 07:22:47 AM »
@Dark and Stormy,
Thanks for your kind words and helpful suggestions!!! I've considered other options for internet but with four of us (two kids playing on their kindles or watching netflix), this is enough to satisfy everyone. Hubby is definitely leaning towards opening a brokerage account with Vanguard. Your suggestions/guidance are greatly appreciated.

elpaso34

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Military family seeking advice with investments
« Reply #10 on: July 07, 2017, 07:25:52 AM »
@Davisgang90,
Nice to hear from another Navy family! You're right about both commissary and NEX. Hubby is almost always willing to pick up groceries on base if need be, but I have often found Walmart of all places beats a lot of the prices, save for meat and dairy because they carry generic brands.

I look forward to reading your blog and congrats to being so close to retirement!! What are you plans for the next chapter in your life? If you haven't read Doug Nordman's book on retiring after the military, I highly recommend it!! Lots of useful info there. Take care and best of luck to you and yours.

Lepetitange3

  • Bristles
  • ***
  • Posts: 356
Re: Military family seeking advice with investments
« Reply #11 on: July 07, 2017, 08:12:13 AM »
We are a little south of you in FL and we are a retired Navy officer/Marine couple with 4 kids.  You're doing great on a lot of fronts, but you are totally right, food/other budget is killing you.  Just for motivation and not to judge...I'm at $350-400 month food costs for the 6 of us (and this includes hungry retired Marine husband and a giant teenage son). 

You are in JAX, we have an Aldi in St aug.  i don't know if Jax has one or not but Aldi beats the commissary by a ton. The cost of driving down to use it will be worth the savings.   Also Jax has Costco...a lot of family staples can be bought a lot cheaper there.  I will say same for having Prime and Netflix.  We only have Prime because I use that and subscribe and save for household stuff/diapers (yes that's right I have a teenager through infant spread).  And that's TV for all 6 of us.  If husband desperately wants a non-Prime show, I just buy the season through Amazon.  Still cheaper than having 12 months of Netflix.  If the kids want other shows, well the ones old enough to know they want x show are old enough to do a little work to earn the difference in $$. 

If you're staying in the house, I'd pay off the mortgage.  What with the free healthcare and all, if you get the rest of your expenses down, no one NEEDs to work if housing is paid off and you're drawing the mil pension.  My husband still does work because he loves career no2  and also Marines *eyeroll*.  I work from home in projects I enjoy a la MMM and happily these projects frequently bring in $$$.  But we could both rest on our metaphorical laurels without working if needed at any time. 


Lepetitange3

  • Bristles
  • ***
  • Posts: 356
Re: Military family seeking advice with investments
« Reply #12 on: July 07, 2017, 08:18:58 AM »
Oh I just saw the Comcast....call them and threaten to cancel.  Seriously (because att also services our area)...we did that and magically they found out that they could lower our bill to $70/month for our service (we have just about the highest package they offer because all the kids).

 My husband did the whole well your prices are higher than ATT so we were thinking about switching song and dance, and literally in about 10 seconds they were like "oh you're eligible for this lower price for the same service".  The call took him maybe all of 5 minutes total.

davisgang90

  • Handlebar Stache
  • *****
  • Posts: 1000
  • Location: NoVa
    • Chart prepping
Re: Military family seeking advice with investments
« Reply #13 on: July 07, 2017, 04:09:36 PM »
@Davisgang90,
Nice to hear from another Navy family! You're right about both commissary and NEX. Hubby is almost always willing to pick up groceries on base if need be, but I have often found Walmart of all places beats a lot of the prices, save for meat and dairy because they carry generic brands.

I look forward to reading your blog and congrats to being so close to retirement!! What are you plans for the next chapter in your life? If you haven't read Doug Nordman's book on retiring after the military, I highly recommend it!! Lots of useful info there. Take care and best of luck to you and yours.
Big fan of Nords (imagine he'll be along soon to comment) and have read his book.  We are moving to Roanoke Va to retire (plan to live on the pension and work only for fun).  My wife is from there and we are both Va Tech grads (45 minutes away).

Check out my blog.  Early retirement from a military perspective.

http://chartprepping.com

elpaso34

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Military family seeking advice with investments
« Reply #14 on: July 08, 2017, 01:04:25 PM »
@lepetiteange3,
Thanks for the kind words and helpful suggestion about Comcast. I'm planning on calling them Monday to see if they can lower the internet cost. Fingers crossed.

Yeah the grocery and eating out are totally killing us. That's awesome you're doing a great job with feeding your family, including your Marine hubby and teenage boy. I need to invest an instapot and do more Crock-Pot meals. Luckily my hubby is always willing to cook two or three nights a week too. Again, thanks for all your advice and info. Always great to hear from another military family who is kicking butt and taking names. I can see the light (in four years.  Lol)

Lepetitange3

  • Bristles
  • ***
  • Posts: 356
Re: Military family seeking advice with investments
« Reply #15 on: July 08, 2017, 06:47:21 PM »
The crockpot is a lifesaver!  Once you find a few meals that can go in that that everyone likes, it's worth it's weight in gold!!

dess1313

  • Bristles
  • ***
  • Posts: 441
  • Location: Manitoba Canada
Re: Military family seeking advice with investments
« Reply #16 on: July 09, 2017, 12:44:43 AM »
Life Situation: Navy pilot with preschool teacher spouse (both 38 yrs old) and two kids living in Jacksonville, FL approximately four years away from retirement.

Adjusted Gross Income: $8400 monthly

Current expenses: Car ins $150, mortgage payment monthly of $1300: (P&I $903.65, Ins and Taxes $347.78, extra principal $48.57), boost mobile cell phone for both $63.54, electric $200 (conservative number I budget for $200 but bill is only that high in the summer for two months), comcast internet $90, church tithe $1025, bills savings to pay for yearly pest control, termite bond, amazon prime, vet, hoa, etc $260, allowance $400 ($200 each spouse), Utah 529 $200, Netflix $10.88, YMCA $85.60, water bill $95, school lunches for kids $52, air1 Christian radio $40, $

2400 to pay for everything else (groceries, gas, toiletries, clothes, etc). = $6372 - DAMN!  it sounds like you need You Need A Budget or something to start tracking your expenses.  that is a LOT going to stuff you can't even really break down.  you could save a lot here that would make a big difference down the road, and prep for your retirement budget better.

Liabilities: Only debt is 15 yr mortgage thru Wells Fargo: $123,770.87 at 2.875%


speaking from experience of trying to buy after ending my mortgage early, i have a couple comments.  if you do plan on selling, it doesn't make a lot of sense to pay it down just to sell your house again, because you will need a down payment of some sort when you try to buy your future house if you move.  being cash poor at that time won't help you.  This is something i'd decide before putting extra payments on it.  yes your monthly costs would go down, but its still a large lump to come up with, and would need planning

Here we have shorter terms on our mortgages, so i am not sure what the costs would be however to end your current mortgage, or if you are able to port it to another property and renew it.  Here in canada you can have 1 -5 year mortgage terms,(not amortizations) which makes it easier when considering selling in the near future
« Last Edit: July 09, 2017, 12:46:24 AM by dess1313 »
YNAB Free month promo
https://ynab.com/referral/?ref=eQ5g_yJi5NxO5hoo&utm_source=customer_referral

https://www.tangerine.ca referral code get $50 for signing up!!!  34500900S1